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Earl Ferrers: My Lords, the noble Lord, Lord Dubs, disturbs me greatly. I long to be able to give him some encouragement and say he has produced the most reasonable amendment and of course we should like to accept it. My difficulty is that I find that most of his amendments, though delightfully and charmingly put, run counter to quite a lot of what the Government are trying to do. That is why I find myself in the position of having to say that it is difficult for us to meet them.

Clause 100 reduces the amount of rent arrears under the mandatory ground for possession for rent arrears in Schedule 2 to the Housing Act 1988. Schedule 2 sets out 16 grounds on which it is possible for a landlord to gain possession of his property. Ground 8 currently

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requires a court to grant a landlord an order for possession of his property if a tenant is in arrears with his rent by an amount equal to 13 weeks' or three months' rent, both at the date when the landlord serves notice of possession and at the date of the court hearing. So the person has to be three months out of date; application has to be made; and then the court hearing is held. By the time the case reaches court it is possible for the tenant to say, "Here is another month's rent". He is then only two months in arrears and the process begins again, until he becomes three months in arrears; proceedings are applied for; and there is another month's wait for the proceedings, by which time the tenant pays up another month's rent. That is an example.

The vast majority of tenants pay their rent on time and in full. The Survey of English Housing shows that in 1994-95 only 5 per cent. of tenants were in rent arrears, not of three months and not even of two months, but of two weeks. It follows that the number who will be in arrears of eight weeks or more is likely to be considerably lower. However, research shows that although the Housing Act 1988 made it easier for landlords to recover possession of their property, they continue to have problems when the tenant is in arrears with his rent.

A quarter of lettings are owned by a landlord with only one property. For those landlords, having a tenant who withholds the rent will be very difficult, particularly if the landlord has a mortgage or a loan to repay. Small landlords will let property only if they are confident that they can cover their loan or mortgage.

It is true that Grounds 10 and 11 of Schedule 2 to the Housing Act 1988 provide discretionary grounds for possession for lesser rent arrears or where the tenant is persistently late in paying the rent. But those grounds do not give landlords the certainty they need that they can repossess their property once a minimum level of rent arrears has accrued.

For a small landlord who relies on the rent to cover his mortgage it is bad enough to have to wait months with little or no rent coming in before he can get his property back. It would be much worse for him if he could not even be certain that the court would grant a possession order. Ground 8 provides that certainty.

The noble Lord's amendments seeks to remove that certainty altogether. Without it, I fear that many people would be dissuaded from letting out their properties in the first place. It would be a backward step for the private rented sector.

The noble Lord, Lord Strabolgi, was concerned about housing benefit. He gave the tragic example of a person who was £600 in arrears. Periodically, very uncomfortable and awkward circumstances arise. But even under the new levels proposed in Clause 100, a tenant is unlikely to be evicted until at least three to four months have elapsed since he first started to accrue arrears. That is because the landlord cannot begin any action until the tenant is at least eight weeks in arrears. He must then give the tenant two weeks' notice of possession proceedings. It will then take at least a month for the case to reach court. A court order can be made only if eight weeks' arrears still exist at the time

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of the hearing. So the whole process takes at least three or four months. That is a reasonable period for a responsible tenant to sort out his financial affairs.

While I sympathise with the example given by the noble Lord, Lord Strabolgi, it is very difficult to make law that takes into account some of the most extreme examples. I quote a phrase which the noble Lord knows; namely, hard cases make bad law. One has to try to produce reasonable law based on reasonable cases. I hope the noble Lord, Lord Dubs, will feel satisfied with the answer I have given.

5.15 p.m.

Baroness Gardner of Parkes: My Lords, before the noble Earl sits down, is he aware that the Greater London Council considered that to allow anyone to build up arrears beyond three weeks was very unkind and unfair? Under its policy it would view the eight weeks as far too long. Does the Minister think that the eight-week period is about right?

Earl Ferrers: My Lords, if I did not think it was about right I should not have advocated it. I am very grateful to my noble friend for pointing out the fact that the GLC thought that three weeks was about right and it was "unfair and unkind" to allow the period to go on longer. That is quite right. In many respects, if the time goes on too long the tenant falls into more and more difficulties. That is why we have tried to be reasonable in accepting that point and reducing the period from three months to two months (from 13 weeks to eight).

Lord Dubs: My Lords, had my amendment said that a tenant could build up arrears for six months or a year before there was ground for eviction, I suggest that the Minister's remarks would not have been very different. I was not arguing that point. I do not believe that it is proper for tenants to get themselves into arrears. Everything should be done to prevent that happening. That was not what the amendment was about.

The amendment said that the courts would have discretion, and that is all. Why should they have discretion? They should have discretion because there may be particular and highly exceptional circumstances; and the court could exercise discretion if it were convinced that the circumstances were sufficiently unusual and exceptional to justify not granting possession. I cannot think of a more modest amendment put from this Dispatch Box over the years, and certainly not on this Bill. Yet the Minister treats it almost as if I were giving a licence to tenants to be in arrears for months, if not longer. It is incredibly modest. By replying in the way he did, the Minister is saying to the courts in this country, "We do not trust you to use your discretion. We shall give you no choice at all". That is what the discussion is about. The Minister's remarks were not about discretion. They were about rent arrears, how awful it was for landlords and how wrong it was to allow large rent arrears to occur.

I wish this were Committee stage. One could then press the Minister harder. All that this amendment seeks is discretion for the courts to deal with highly

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exceptional instances. Perhaps the Minister will think again. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dubs moved Amendment No. 132:

Page 71, line 11, at end insert--
("(c) after paragraph (d) there shall be inserted--
"For the purposes of this ground, any amount of unpaid housing benefit to which the tenant is lawfully entitled shall be regarded as if it were rent by the tenant;".").

The noble Lord said: My Lords, had the Government seen fit to accept Amendment No. 131, Amendment No. 132 would not have been called. This amendment covers similar ground. I am sorry that it was not grouped with the previous one but there is a slight technical difference.

Amendment No. 132 seeks to enable the court, in considering grounds for possession under rent arrears, to set aside any element of the arrears arising from official error such as a slowness in the processing of a housing benefit claim. In other words, in ordinary language, a tenant who is in arrears could say, "I am in arrears to the extent of £100. The housing benefit authority owes me £120. Can that money be set against the £100 in order that I be judged not to be in arrears?"

This is another way of getting at the same point and one which may appeal a little more to the Minister than the previous one. Obviously the tenant would need to provide evidence as to the amount of housing benefit arrears to which he was entitled in order to demonstrate to the court that the money was owed to him from official sources and therefore it would not be appropriate to use Ground 8 as a way of achieving mandatory eviction from the premises.

The amendment is very reasonable. I suspect that it will hang on the ability of the tenant to produce evidence that the local authority has been slow in paying housing benefit. It is an even more reasonable amendment than the last one--I do not know how much more reasonable it is possible to be on this matter. Perhaps the Minister will feel that this amendment, being so reasonable, is worthy of further thought. I beg to move.

Earl Ferrers: My Lords, as the day goes on, the noble Lord, Lord Dubs, becomes more persuasive and makes me feel more of a heel because I cannot agree with him. I shall be careful if ever I should have a drink with the noble Lord--if he should ever offer me one--because I fear that, even if it were a poisoned chalice, he would say that it is a most delectable drink and that I should take it.

The noble Lord is enormously persuasive in this matter. He said that this is not the Committee stage, and that is true. He also said that Amendment No. 132 is similar to Amendment No. 131, which it is. He then made a remark which almost persuaded me to invite the leave of the House to allow me to make an intervention, but not quite.

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The noble Lord said that my speech did not answer his point. It was a gentle speech about the ability of the courts to use their discretion and I was referring to rent arrears. I had the same response the other day from the noble Baroness, Lady Hollis, who said that I had not addressed her point and had interpreted it wrongly. All I can say is that if the words of the amendment are included in the Bill they will have a certain effect. I tried to explain what the effect would be if the words of Amendment No. 131 had gone into the Bill. The noble Lord may have thought that they would have a different effect but, as we see it, it would have the effect that I stated.

The difficulty with this amendment is not dissimilar to the difficulty with the previous one. Under social security legislation, local authorities are required to process housing benefit claims within 14 days of all the required information being received. If the deadline is not met, local authorities have a statutory duty to make payments on account where the delay is not the fault of the tenant. The local authority is entitled to regard that a delay by an employer in providing information is not the fault of the tenant. Department of Social Security statistics show that over 80 per cent. of claims for housing benefit are now processed within that deadline and performance is steadily improving. That figure was queried during the debate in Committee. It has subsequently been checked with the DSS, which confirms it. The DSS also strengthened its guidance in April to remind local authorities of their legal duties to make payments on account. In view of the fact that the possession process is still likely to take three to four months, even under the change which we propose, housing benefit claimants should not be affected.

Local authorities must also ensure that the method and frequency of payments suit the reasonable needs of the tenant. The majority of tenants are paid on a two-weekly basis. Local authorities also have wide powers to pay housing benefit direct to the landlord. They have discretion to make direct payments if the tenant requests it or if it would be in the best interests of the tenant.

They must make payments direct if the tenant is eight weeks in arrears and recent guidance from the DSS recommends them to give serious consideration to direct payments if there are about six weeks' arrears. We would therefore expect that, where the tenant is receiving benefit and is in arrears with his rent, benefit will be paid direct to the landlord long before the case gets to court. A recent sample survey suggests that some 70 per cent. of payments are made direct to the landlord.

The noble Lord's amendment becomes a little unrealistic, even though he says it is the simplest and, astonishingly, the most modest amendment that has come from the Opposition Benches. The landlord is contractually entitled to his rent. It is not fair for him to be personally disadvantaged if his bankers say that he is not paying his bills and in fact he is being denied the rent that is contractually his. The lender will not consider the landlord's monthly loan or mortgage repayments to have been paid just because his tenant's housing benefit may be in the pipeline.

The argument I have given to the noble Lord, Lord Dubs, is fairly convincing. I know that the noble Lord does not like to be convinced, but I am sure

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that if he thinks about what I have said, he will find that he is convinced. My reasons indicate that the kind of situation about which the noble Lord is concerned is taken care of.

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